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February 20, 2001 [WSJ.com -- Your Career Matters]

A Dearth of Economics Doctorates
Leads to Royal Recruiting Battles

By JON E. HILSENRATH
Staff Reporter of THE WALL STREET JOURNAL

During the last month, Julie Mortimer has been flown around the country on all-expense-paid trips to Chicago, Boston, New York and San Francisco. She's been wined and dined at the upscale Rialto restaurant in Harvard Square and wooed through e-mail by Gary Becker, a Nobel Prize winning economist at the University of Chicago.

Your Career MattersSuch fawning used to be the calling card of high-profile fields such as consulting and investment banking. But 28-year-old Ms. Mortimer is part of a new contingent of hot job candidates: students with doctorates in economics who want to teach.

Traditionally, the job search for these entry-level college professors has been a long battle that ended with poor pay in a dingy, ill-equipped office. New economics professors "used to get a computer and a couple of thousand bucks" to start, says Lawrence Katz, who runs Harvard's recruiting effort for economics scholars.

But these days, a confluence of events including a scarcity of economics Ph.D.s and a rise in students clamoring to study economics means that even low-level candidates are treated like big shots. Pay for entry-level economics professors has risen by about 15% since 1999, according to a University of Arkansas study. And this year's crop of top doctoral students have seen universities sweeten offers for assistant-professor jobs with light teaching loads, early sabbaticals, $20,000 research budgets and $15,000 in summer pay. That's on top of the $70,000 to $80,000 salaries they already are offering for a nine-month school year. Those who focus on finance are getting even sweeter offers with many business schools offering six-figure salaries.

Ms. Mortimer, a former management consultant who impressed professors with a study on the economics of the video-rental industry, canceled 11 interviews after she corralled offers from Harvard, the University of Chicago and Northwestern University's Kellogg Graduate School of Management. She's received two additional offers since, but she's not deciding until she figures out where her husband will land. He's also a doctoral candidate, and has gotten seven offers from consulting companies and the government. "The whole market has really gone much better than I would have expected," says Ms. Mortimer, who earned her undergraduate degree at Carlton College in Minnesota in 1994.

[econ art]

The hot market for young economists might seem odd with the economy slowing and layoffs mounting. But supply and demand helps explain it. On the demand side, college economics departments are faced with increased competition from high-paying consulting companies and business schools who trawl the annual American Economics Association meeting in January for young talent. Professors say Wall Street firms are also in the hunt for Ph.D.s with a financial focus.

Simultaneously, undergraduate enrollment in economics classes has been rising after a big slump in the early 1990s, putting pressure on schools to bring in more professors. At top schools, including Harvard and Princeton, the number of undergraduates majoring in economics is up 37% from 1995, says John Siegfried, a Vanderbilt University professor who tracks the field.

At schools like Harvard or Columbia, which don't house undergraduate business departments, economics now is the most popular major on campus. Harvard's introduction to economics class -- taught by Martin Feldstein, an adviser to President George W. Bush during his campaign -- is packed with 900 students in a typical year. At Columbia, the number of students taking macroeconomics has risen from to 455 from 164 since 1991. Even at engineering-oriented Massachusetts Institute of Technology, economics accounts for about one-tenth of undergraduate majors.

"People feel an economics degree is going to be helpful as they decide that their career paths may take them into business schools or consulting or financial markets," says Richard Clarida, chairman of Columbia's economics department.

Hungry for teaching and research talent, Mr. Clarida three years ago led a high-profile effort to lure Robert Barro, a superstar Harvard economist, over to Columbia with a salary reported at $300,000. Mr. Barro backed out, but the following year Mr. Clarida turned his recruiting battle to focus on young assistant professors and brought in six. Harvard last year hired five new Ph.D.s, a large number considering that its staff just numbers 40. Princeton, which recently began a new finance program, is adding four or five economics positions to a faculty of 47. Public universities are also beefing up.

Then there's the supply side. Ironically, despite the demand from undergraduates, fewer Americans are choosing to go all the way down the doctorate path. Vanderbilt's Mr. Siegfried estimates that this year, universities will turn out no more American economics Ph.D.s than it did during the presidency of Dwight Eisenhower.

"Students who would have gone on for [advanced] degrees in economics in the past are going for M.B.A.s and law degrees," says Gary Becker, the Nobel prize winner from the University of Chicago. "The financial rewards are greater and they come quicker." A typical doctorate takes five years to complete, a big opportunity cost for a young professional. Added to that, a glut of academic scholars who enrolled during the years of the Vietnam War from the mid-1960s to the early 1970s are now near retirement.

Helping to fill the void are foreign students like Ali Hortacsu, a Turkish-born Stanford doctorate candidate. Five years ago he decided to drop electrical engineering and turn to economics. While acquaintances were heading off to dot-com start-ups, like eBay, the online auction house, "I said, 'No, I'm not going to take a risk like that,' " he says. Instead he went back to school and spent years plodding through economic theories about how auctions work. He wrote papers on eBay and Turkish bond auctions and walked away from last month's recruiting battles with six job offers that he's still weighing.

George-Marios Angeletos, a 25-year-old Harvard economics scholar originally from Greece, says he had an offer to teach at the University of Chicago's business school on a six-figure salary before he even started interviewing.

Ground zero for the talent chase was in New Orleans in early January. Just a few minutes from Bourbon Street, young Ph.D.s packed in 10 interviews a day for three days at the annual American Economics Association conference. Like professional basketball teams who check a player's vertical leap in their predraft meat markets, professors were busy prodding for Mr. Angeletos's mastery of the optimal maturity structure of noncontingent debt and Mr. Hortacsu for nuances in his theories about Turkish bond auctions. Those who performed best were flown in by universities to give lectures to faculty, followed by dinner and drinks.

As for Ms. Mortimer, she says she's been getting encouraging e-mails from Mr. Becker since her "fly-out" to the University of Chicago. "I was very nervous before the whole thing started," she says. But now she's just trying to keep track of her options.

Write to Jon E. Hilsenrath at jon.hilsenrath@wsj.com



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